Mortgage News

This chart may read like gibberish, so I notated it. 

It’s meant to illustrate that daily mortgage rates are not based on the yield of the 10-Year Treasury Note.  Sure, there is a long-term correlation between the two, but "long-term" doesn’t do us any good when we’re looking to lock an interest rate today.

We’ve covered this topic in-depth once before, but it’s worth revisiting. 

Mortgage rates are based on the price of mortgage-backed securities, plus all applicable fees.  Specifically, the formula works as follows:

1. Start with the base mortgage rate, as set by Wall Street
2. Add adverse market delivery charges
3. Add loan-level pricing adjustments

This mortgage-rate formula is a major reason why rates rarely vary from lender-to-lender.  There’s just no wiggle room in there because the rate is set by the combination of mortgage-backed bond prices, plus whatever fees that Fannie Mae and Freddie Mac tack on top.

In other words, conforming mortgage rates have nothing to do with the daily 10-Year Treasury yield (although the press may tell you otherwise). 

Today’s chart confirms it.

Now, as an unfortunate post-script, getting access to pricing in mortgage-backed securities is both difficult and expensive.  So, if you ever have questions about what mortgage rates are doing on a given day, just know that you can always call or email me, or follow me on Twitter. 

I’m happy to share with you what I know so you can make better mortgage decisions.

I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week’s survey is now available.

As a reminder:

1. The survey is for conforming loans only.
2. I welcome emails from readers about purchase or refinance plans.
3. I twitter market updates a few times daily.  Follow me, if you want.

Anyway, on to the group’s predictions for the next 30 days:

• 31% of participants predict rates will increase
• 46% of participants predict rates will decrease
• 23% of participants predict rates will remain unchanged

I am predicting that rates will decrease over the next 30 days, but that doesn’t mean you should necessarily follow my advice when choosing whether to lock a rate, or float it.  My advice may not be appropriate for your individual situation.

From the Bankrate.com survey:

"When the Federal Reserve implies a guarantee of mortgage-backed bonds, interest rates are sure to fall."

My expectations for mortgages rates right now are an extension of a post earlier this week, which then turned into a brief radio interview.

I’ve been using Twitter to communicate the mid-day market shifts to clients.  It’s simple to set up and completely non-intrusive.  You’re welcome to follow me if you’d like the updates, too.